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| Modaraba
Al-Mali |
|
| Annual
Report 1996 |
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|
|
| Managed
by |
|
| Al-Mal
Corporation Ltd. |
|
| (Formerly
Modaraba Al-Mal Corporation Ltd.) |
|
|
| C
O N T E N T S |
|
Pages |
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|
|
|
| Corporate
Information |
|
2 |
|
| Directors'
Report |
|
3 |
|
| Auditors'
Report |
|
5 |
|
| Balance
Sheet |
|
6 |
|
| Profit
and Loss Account |
|
8 |
|
| Statement
of Changes in Financial Position |
|
9 |
|
| Notes
to the Accounts |
|
10 |
|
| Pattern
of Certificate Holdings |
|
28 |
|
|
| Corporate
Information |
|
|
| BOARD
OF DIRECTORS |
|
| Mr.
Syed Iradat Husain |
Chairman |
|
|
|
|
| Mr.
Maqbool Husain |
|
Vice Chairman |
|
|
|
|
| Mr.
Zafar H. Naqvi |
|
Managing Director &
Chief Executive |
|
|
| Mr.
Nazir A. Shaikh |
Director |
|
|
|
|
| Mr.
Mohammad Kamil |
|
Director |
|
|
|
|
| Mr.
Ashraf Kalam |
|
Director |
|
|
|
|
| Mr.
Ahmad H.I. Dada |
Director |
|
|
|
|
| Mr.
Naushad Hussain |
Director |
|
|
|
|
|
| COMPANY
SECRETARY |
|
| Mr.
D.V. Karia |
|
|
|
| MODARABA
MANAGEMENT COMMITTEE |
|
| Mr.
Syed Iradat Husain |
|
| Mr.
Maqbool Husain |
|
|
| Mr.
Zafar H. Naqvi |
|
|
|
|
|
| AUDITORS |
|
| Ford,
Rhodes, Robson, Morrow |
|
| Chartered
Accountants |
|
| Finlay
House |
|
|
| I,I.
Chundrigar Road |
|
| Karachi. |
|
|
|
|
| BANKERS |
|
| Muslim
Commercial Bank Limited |
|
| National
Bank of Pakistan |
|
| United
Bank Limited |
|
|
| REGISTERED
OFFICE |
|
| 10th
Floor, Progressive Square |
|
| Opposite
Nursery, Sharea Faisal |
|
| Karachi.. |
|
| Phones
: 4547521-4 |
|
| Fax : (92-21) 4547526 |
|
|
| DIRECTORS'
REPORT |
|
| The
Board of Directors of AI-Mal Corporation Limited have pleasure in presenting
the 10th Report of Modaraba AI- |
|
| Mali
together with Audited Accounts for the year ended June 30, 1996. |
|
|
|
| 1.
Operating Results: |
|
| Summarised
results for the year under report are as under: |
|
(Rs. in "000") |
|
|
|
|
|
Year Ended |
6 Months |
|
|
|
|
June |
July |
|
|
|
|
1996 |
1995 |
|
|
|
|
|
|
|
| *
Total operating income |
114,583 |
59,420 |
|
| *
Net profit before management fee & taxation |
|
26,008 |
15,731 |
|
| * Less: Management fee |
2,364 |
1,430 |
|
|
|
23,644 |
14,301 |
|
| * Less: Provision for taxation |
7,188 |
3,500 |
|
| * Net profit for the year |
|
16,456 |
10,801 |
|
| *
Add: Unappropriated profit b/f |
8,934 |
293 |
|
| *
Profit available for appropriation |
25,390 |
11,094 |
|
| *
Appropriations: |
|
| - Statutory Reserve |
3,291 |
2,160 |
|
| - 11% Cash dividend (1995:
Nil) |
20,083 |
-- |
|
|
|
23,374 |
2,160 |
|
| *
Unappropriated profit carried forward |
|
2,016 |
8,934 |
|
|
| 2.
Profit Distribution: |
|
| Directors
take pleasure in announcing distribution of cash dividend @ 11% i.e.
Rs.1.10/- per certificate. |
|
|
|
|
| 3.
Statutory Reserves: |
|
| In
compliance with SBP Prudential Regulations, the Board of Directors has
decided to appropriate 20% of the |
|
| year's
profit to Statutory Reserves until it equals the paid up capital of the
Modaraba. |
|
|
|
| 4.
Business Operations: |
|
| Prolonged
depressed economic activity, high rate of inflation and political uncertainty
affected our business |
|
| operations
during the period under review. Various new taxes were imposed which would
not only make leasing |
|
| more
expensive for the lessee but also increase the administrative expenses of the
lessor. There was intense |
|
| competition
for leasing business. However, through concerted efforts, we were able to
write new leases amounting |
|
| to
Rs.84.8 million during the year as compared to Rs.29.7 million during the
previous six months. |
|
|
| Despite
increase in the lease portfolio we were able to earn pretax profit of only
Rs.23.6 million for the whole |
|
| year
as compared to Rs.14.3 million during the six months ended June 30,1995.
Leasing income declined as |
|
| some
high return leases began to mature and were replaced by leases at highly
competitive rates. Operating |
|
| costs
increased by 2.3% and provision for bad debts increased to Rs.4.76 million as
compared to Rs.0.73 million |
|
| during
the six months ended June 30, 1995. This was due to strict application of
prudential regulations in two |
|
| major
accounts but negotiations are continuing and we expect some recoveries.
Earnings per certificate was |
|
| Rs.0.90
which under the present circumstances is considered satisfactory. |
|
|
|
|
| 5.
Future Prospects: |
|
| In
the face of prevailing uncertainty on. political and economic fronts, reports
of decline in cotton production and |
|
| heavy
taxes introduced by the Government, the general business prospects do not
appear to be encouraging. |
|
| Stock
exchange conditions continue to depict bearish overtones and the investors
are carrying the burden of |
|
| eroded
equity portfolio Income tax rate applicable to your Modaraba has risen to 25%
as compared to 12.50% |
|
| upto
June 1995. Fixed costs are also on the rise. Competition for procuring new
leasing business is becoming |
|
| more
and more intense. |
|
|
|
| The
management is trying to meet the situation by introducing efficiencies and
cost controls at all levels. By |
|
| providing
high quality service to the clients we are hopeful of at least retaining our
share of leasing business. We |
|
| have
placed maximum emphasis on recoveries. |
|
|
|
|
| 6.
Auditors: |
|
| The
present auditors, Messrs. Ford, Rhodes, Robson, Morrow, Chartered
Accountants, are due for retirement, |
|
| and
being eligible, offer themselves for re-appointment for the year ending June,
1997. |
|
|
| 7.
Pattern of Certificate holding: |
|
| The pattern of certificate-holding is
attached. |
|
|
| 8.
Acknowledgment: |
|
| The
Directors wish to place on record their appreciation and thanks to
certificate-holders for their continued |
|
| confidence
in the Modaraba, to the authorities for their guidance and to all the Members
of Management and |
|
| staff
for their dedication and hard work. |
|
|
|
|
| On
behalf of the Board, |
|
|
|
|
| S.
IRADAT HUSAIN |
|
| Chairman |
|
|
| Karachi-
14th November, 1996. |
|
|
|
| AUDITORS'
REPORT TO THE CERTIFICATE HOLDERS |
|
| We
have audited the annexed balance sheet as at June 30, 1996 and the related
profit and loss account and statement |
|
| of
changes in financial position together with the notes to the accounts for the
year ended June 30, 1996 of |
|
| MODARABA
AL-MALI which are modaraba company's (AI-Mal Corporation Limited)
representation and we state that |
|
| we
have obtained all the information and explanations which we required and.
after due verification thereof, we report |
|
| that: |
|
|
| (a)
in our opinion proper books of account have been kept by the modaraba company
in respect of Modaraba AI- |
|
| Mali
as required by the Modaraba Companies and Modaraba (Floatation and Control)
Ordinance, 1980, and |
|
| Modaraba
Companies and Modarabas Rule, 1981; |
|
|
| (b)
in our opinion, the balance sheet and the profit and loss account have been
drawn up in conformity with the |
|
| Modaraba Companies and Modaraba (Floatation
and Control) Ordinance, 1980, and Modaraba Companies |
|
| and Modarabas Rules, 1981; and |
|
|
| (c)
in our opinion and to the best of our information and according to the
explanations given to us; |
|
|
| (i)
the balance sheet and the related profit and loss account and statement of
changes in financial position, |
|
| which
are in agreement with the books of account, exhibit respectively a true and
fair view of the state |
|
| of
the Modaraba's affairs as at June 30, 1996 and the profit and the changes in
the financial position for |
|
| the
year ended on that date; |
|
|
| (ii)
in our opinion, there was no zakat deductible at source, under the Zakat
& Ushr Ordinance, 1980 |
|
|
| (iii)
the business conducted, investments made and expenditure incurred by the
Modaraba are in accordance |
|
| with
the objects, terms and conditions of the Modaraba. |
|
|
| Ford,
Rhodes, Robson, Morrow |
|
| Chartered
Accountants |
|
|
|
|
| Karachi:
December 05, 1996 |
|
|
|
| BALANCE
SHEET |
|
| AS
AT JUNE 30, 1996 |
|
|
|
|
June 30 |
June 30 |
|
|
|
|
1996 |
1995 |
|
|
|
Note |
Rupees |
Rupees |
|
| CAPITAL
AND RESERVES |
|
| Certificate
capital |
|
| Authorised |
|
|
| 20,000,000
(1995: 20,000,000) |
|
| Modaraba
Certificates of Rs. 10/-each |
|
|
200,000,000 |
200,000,000 |
|
|
|
|
============ |
============ |
|
|
|
|
| Issued,
subscribed and pa. id up |
|
3 |
182,574,000 |
182,574,000 |
|
|
|
|
| Capital
Reserve |
|
|
|
| Statutory
reserve |
|
4 |
12,127,462 |
8,836,252 |
|
|
| Revenue
reserve |
|
| Unappropriated
profit |
|
|
2,015,666 |
8,933,992 |
|
|
|
|
------------ |
------------ |
|
|
|
|
14,143,128 |
17,770,244 |
|
|
|
|
|
|
|
------------ |
------------ |
|
|
|
|
|
|
196,717,128 |
200,344,244 |
|
| LONG
TERM MUSHARAKA, MORABAHA |
|
|
| AND
TERM FINANCES |
|
|
5 |
16,194,401 |
3,481,632 |
|
|
|
| DEFERRED
LIABILITIES |
|
| Staff
gratuity |
|
|
-- |
390,949 |
|
| Customers'
security deposits |
|
|
16,868,584 |
18,395,234 |
|
|
|
16,868,584 |
18,786,183 |
|
| CURRENT
LIABILITIES |
|
|
|
| Current
maturity of musharaka, morabaha & term finances |
|
4,287,231 |
4,217,104 |
|
| Current
maturity of customers' security deposits |
|
14,194,263 |
11,220,758 |
|
| Creditors,
accrued and other liabilities |
|
6 |
7,887,669 |
5,782,979 |
|
| Rentals
received in advance |
|
|
1,968,890 |
1,958,166 |
|
| Provision
for taxation |
|
|
7,321,241 |
3,246,284 |
|
| Dividend
payable |
|
|
702,772 |
27,948,749 |
|
| Proposed
dividend |
|
|
20,083,140 |
-- |
|
|
|
|
------------ |
------------ |
|
|
|
56,445,206 |
54,374,040 |
|
| CONTINGENCIES
AND COMMITMENTS |
|
|
7 |
|
|
|
|
------------ |
------------ |
|
|
|
286,225,319 |
276,986,099 |
|
|
|
|
============ |
============ |
|
|
|
|
June 30 |
June 30 |
|
|
1996 |
1995 |
|
|
|
Note |
Rupees |
Rupees |
|
|
|
|
| TANGIBLE
FIXED ASSETS |
|
|
8 |
|
| Assets
given on lease - net cost |
|
|
354,227,536 |
337,020,614 |
|
| Less:
Accumulated amortization |
|
|
177,519,642 |
168,496,851 |
|
|
|
|
------------ |
------------ |
|
|
|
|
|
|
176,707,894 |
168,523,763 |
|
|
|
|
|
|
|
|
| Assets
in own use- cost |
|
|
5,134,824 |
4,151,162 |
|
| Less:
Accumulated depreciation |
|
|
2,894,247 |
2,273,882 |
|
|
|
|
------------ |
------------ |
|
|
|
|
|
|
2,240,577 |
1,877,280 |
|
| Capital
Work-in-progress |
|
|
9,312,543 |
- |
|
|
|
|
------------ |
------------ |
|
|
|
|
188,261,014 |
170,401,043 |
|
|
|
|
|
|
| LONG
TERM INVESTMENTS [Market Value Rs.11.8 |
|
9 |
24,121,812 |
18,791,669 |
|
|
|
million note 2.2 (e) ] |
|
|
| DEFERRED
EXPENDITURE |
|
10 |
471,406 |
745,640 |
|
| CURRENT
ASSETS |
|
|
|
| Short
term musharaka finances |
|
11 |
25,517,400 |
25,000,000 |
|
| Short
term morabaha finances |
|
12 |
15,234,909 |
23,403,030 |
|
| Marketable
securities |
|
13 |
5,379,963 |
5,588,245 |
|
| Lease
rentals receivable |
|
14 |
19,405,193 |
16,915,891 |
|
| Advances,
deposits, prepayments and |
|
|
| other
receivables |
|
15 |
4,985,102 |
5,938,502 |
|
| Cash
and bank balances |
|
16 |
2,848,520 |
10,202,079 |
|
|
|
|
------------ |
------------ |
|
|
|
|
73,371,087 |
87,047,747 |
|
|
|
|
|
------------ |
------------ |
|
|
|
286,225,319 |
276,986,099 |
|
|
|
============ |
============ |
|
|
| The
annexed notes form an integral part of these accounts. |
|
| The
auditors' report is annexed hereto. |
|
|
| PROFIT
AND LOSS ACCOUNT |
|
| for
the year ended June 30, 1996 |
|
|
12 Months |
6 Months |
|
|
|
June, 1996 |
June, 1995 |
|
|
|
Note |
Rupees |
Rupees |
|
|
| Operating
income |
|
17 |
114,583,236 |
59,419,504 |
|
| Operating
cost |
|
18 |
82,247,275 |
40,188,388 |
|
| Profit
distribution on borrowings |
|
19 |
1,806,091 |
805,955 |
|
|
|
|
------------ |
------------ |
|
|
|
|
84,053,366 |
40,994,343 |
|
|
|
|
|
|
|
|
|
------------ |
------------ |
|
|
|
|
30,529,870 |
18,425,161 |
|
| Other
income |
|
20 |
2,399,749 |
703,034 |
|
|
|
|
------------ |
------------ |
|
|
|
|
32,929,619 |
19,128,195 |
|
| Less:
Provision for doubtful/classified debts |
|
|
4,758,152 |
732,049 |
|
| Provision
for diminution in value of investments |
|
2,163,068 |
2,664,488 |
|
| Modaraba
company's management fee |
|
|
2,364,402 |
1,430,151 |
|
|
|
|
------------ |
------------ |
|
|
|
|
23,643,997 |
14,301,507 |
|
|
| Provision
for taxation- Current |
|
|
5,300,000 |
3,500,000 |
|
|
|
- Prior years |
|
|
1,887,973 |
-- |
|
|
|
|
------------ |
------------ |
|
|
|
|
7,187,973 |
3,500,000 |
|
|
|
|
------------ |
------------ |
|
| Profit
for the year/period |
|
|
16,456,024 |
10,801,507 |
|
| Unappropriated
profit brought forward |
|
|
8,933,992 |
292,786 |
|
|
|
|
------------ |
------------ |
|
| Available
for appropriation |
|
|
25,390,016 |
11,094,293 |
|
|
| Appropriations: |
|
| Proposed
dividend Rs. 1.10 (1995: Nil) per certificate |
|
20,083,140 |
-- |
|
| Transfer
to statutory reserve |
|
3,291,210 |
2,160,301 |
|
|
|
|
------------ |
------------ |
|
|
|
|
23,374,350 |
2,160,301 |
|
|
|
|
|
|
|
|
|
------------ |
------------ |
|
| Balance
carried forward |
|
2,015,666 |
8,933,992 |
|
|
|
============ |
============ |
|
|
| The
annexed notes form an integral part of these accounts. |
|
|
| Statement
of Changes in Financial Position |
|
| (Cash
Flow Statement) |
|
| for
the year ended June 30, 1996 |
|
|
|
12 Months |
6 Months |
|
|
|
June, 1996 |
June, 1995 |
|
|
|
Rupees |
Rupees |
|
| CASH
FLOWS FROM OPERATING ACTIVITES |
|
| Net
Profit before management fee and taxation |
|
26,008,399 |
15,731,658 |
|
| Adjustment
for non cash items |
|
|
| Depreciation |
- Leased assets |
|
69,505,783 |
34,772,651 |
|
|
|
- Own assets |
|
831,079 |
345,877 |
|
| Amortisation
of deferred expenses |
|
274,234 |
177,214 |
|
| Provision
for gratuity/(written back) |
|
(390,949) |
47,259 |
|
| Gain
on disposal of own assets |
|
|
(143,164) |
(8,000) |
|
| Loss/(gain)
on investments |
|
|
35,815 |
24,358 |
|
| Financial
charges |
|
|
1,806,091 |
805,955 |
|
| Dividend
income |
|
|
(557,993) |
(190,932) |
|
|
|
|
------------ |
------------ |
|
| Cash
generated from operations |
|
|
97,369,295 |
51,706,040 |
|
| (Increase)/decrease
in trade and other receivables |
|
5,532,282 |
(12,771,163) |
|
| (Increase)/decrease
in marketable securities |
|
208,282 |
1,062,115 |
|
| Increase/(decrease)
in trade payables |
|
2,315,554 |
400,605 |
|
|
|
|
------------ |
------------ |
|
|
|
|
105,425,413 |
40,397,597 |
|
|
|
|
|
|
| Financial
charges paid |
|
|
(1,922,376) |
(1,144,128) |
|
| Income
taxes paid |
|
|
(3,113,016) |
(16,914) |
|
| Management
fee paid |
|
|
(2,610,000) |
(1,560,000) |
|
| Net
cash from operating activities |
|
97,780,021 |
37,676,555 |
|
|
|
|
|
|
|
| CASH
FLOWS FROM INVESTING ACTIVlTES |
|
|
|
| Purchase
of |
- Leased assets |
|
(84,828,969) |
(29,725,064) |
|
|
|
- Own assets |
|
(10,621,755) |
(312,050) |
|
| Purchase
of long term investments |
|
(5,620,453) |
(2,873,325) |
|
| Proceeds
from sale of fixed assets - Leased |
|
7,139,055 |
3,118,837 |
|
|
|
- Own |
|
258,000 |
49,692 |
|
| Proceeds
from sale of long term investments |
|
254,495 |
37,075 |
|
| Profit
received from bank |
|
|
597,023 |
483,297 |
|
| Dividend
received |
|
|
705,250 |
327,625 |
|
| Costomrs'
security deposits received |
|
1,446,855 |
1,927,210 |
|
|
|
|
------------ |
------------ |
|
| Net
cash used in investing activities |
|
(90,670,499) |
(26,966,703) |
|
|
|
|
|
|
| CASH
FLOWS FROM FINANCING ACTIVITIES |
|
|
|
| Proceeds
from long-term borrowings |
|
12,782,896 |
'(2,615,428) |
|
| Dividend
paid |
|
|
(27,245,977) |
(66,871) |
|
|
|
|
------------ |
------------ |
|
| Net
cash used in financing activities |
|
(14,463,081) |
(2,682,299) |
|
|
|
|
|
|
|
|
|
------------ |
------------ |
|
| NET
INCREASE/(DECREASE) IN CASH AND CASH EQUIVALENTS |
|
(7,353,559) |
8,027,553 |
|
| CASH
& CASH EQUIVALENTS AT BEGINNING OF THE YEAR/PERIOD |
|
10,202,079 |
2,174,526 |
|
|
|
|
|
|
|
|
|
------------ |
------------ |
|
| CASH
AND CASH EQUIVALENTS AT END OF THE YEAR/PERIOD |
|
2,848,520 |
10,202,079 |
|
|
============ |
============ |
|
|
| NOTES
TO THE ACCOUNTS FOR THE YEAR ENDED JUNE 30, 1996 |
|
|
|
| 1.
LEGAL STATUS AND NATURE OF BUSINESS |
|
| Modaraba
AI-Mali is a multipurpose; perpetual Modaraba formed under the Modaraba
Companies and |
|
| Modarabas
(Floatation and control) Ordinance, 1980, and the rules framed thereunder and
is managed by AI- |
|
| Mal
Corporation Limited. It is listed on the Karachi, Lahore and Islamabad Stock
Exchanges. It is engaged |
|
| in
the business of leasing, morabaha and musharaka financing and other related
business. |
|
|
| 2.
SIGNIFICANT ACCOUNTING POLICIES |
|
| (a)
Overall valuation policy |
|
| These accounts have been prepared under the
historical cost convention. |
|
|
|
| (b)
Staff gratuity |
|
| The
modaraba operates a gratuity scheme for all its employees. Provision is made
annually out of profits |
|
| to
cover obligations under the scheme. After obtaining approval from the
Commissioner Income Tax, the |
|
| scheme
is now being operated as a funded gratuity scheme. |
|
|
| (c)
Fixed assets |
|
|
| (i)
Assets given out on lease and amortization |
|
|
| All
lease agreements are accounted for as operating leases. |
|
|
| Leased
assets are stated at cost to the Modaraba less accumulated amortization. |
|
| Amortization
is charged to income applying the annuity method whereby the amortizable
value of assets |
|
| is
amortized over the lease period. |
|
|
| Gain
or loss on disposal of assets is included in income currently. |
|
|
| (ii)
Assets in own use and depreciation |
|
|
| Assets
in own use are stated at cost less accumulated depreciation. Depreciation is
charged to income |
|
| applying
the straight line method whereby the cost of asset is written off over its
estimated useful life. |
|
| In
respect of additions and disposals during the year depreciation is charged
proportionately to the |
|
| period
of use. |
|
|
| Capital
work-in-progress is stated at cost. |
|
|
|
|
| Gain
or loss on disposal of assets is included in income currently. |
|
|
| (d)
Deferred Expenditure |
|
| Deferred
expenditure incurred in connection with the floatation of Modaraba and
right/bonus issue are being |
|
| written
off over a period of five years from the date of incurrence. |
|
|
| (e)
Investments |
|
| Short
term investments are carried at lower of moving average cost and market value
determined on |
|
| aggregate
portfolio basis. In case of long-term investments the effect of permanent
diminution, if any, in |
|
| the
value of investments is charged to profit and loss account. |
|
|
|
|
| (f)
Revenue recognition |
|
| (i)
Lease rentals are recognised as income when due on a systematic basis over
the lease period. Income |
|
| pertaining
to the periods falling between the due dates and the period end is recognised
on an accrual |
|
| basis. |
|
|
| (ii)
Return on short t |
